Monday, November 30, 2009

At 9:34 P.M. on Friday, November 27, train number 166, the luxurious Nevsky Express, carrying 681 passengers, bound from Moscow to St. Petersburg was blown up by a 15 pound TNT homemade bomb.

The attack took place in the vicinity of Alekshinka-Uglovka in Tversk region. 25 passengers were killed and some 90 were injured by the blast.

Shortly after the initial blast, another bomb exploded in the same vicinity without causing additional damage. According to the head of the Investigation Committee of the Russian Prosecutors Office, Aleksandr Bastrikin, the placing of two bombs meant to explode seperately was a trademark used by North Caucasian rebels and therefore they became the primary suspects behind the blast, the deadliest terrorist attack on a train in contemporary Russian history.

The first terrorist attack on the Nevsky Express took place on August 13, 2007 in the Novgorod region. Nobody was killed; however 60 passengers were injured and the Russian Railways suffered a loss of 236 million rubles.

The alleged organizer of the 2007 attack was 29-year-old Pavel Kosolapov, a former Russian army soldier who joined the Chechen resistance and took part in combat operations. In 2003 he is alleged to have taken part in a number of attacks on bus stops in Krasnodar. Kosolapov was named as a potential suspect shortly after the attack on the Nevsky Express last week.

The attack on the Nevsky Express is the first large scale terrorist act outside the borders of the North Caucasus’ during Dmitri Medvedev’s presidency and Russian observers are carefully watching how the Russian President will react to this serious national security threat.

On November 28, Medvedev met with the heads of all government departments working on restoring normalcy after the attack and demanded that he be personally informed of all new developments. According to Vedomosti, Medvedev had no plans to address the Russian nation about this incident.

What is surprising is that few in Moscow are questioning Prime Minister Vladimir Putin’s strategy of placing Ramzan Kadyrov in charge of Chechnya, which some claim has been instrumental in reviving the rebellion by his use of brute force and repressive (according to many) criminal measures, against the local population in order to please Putin and enrich himself and his closest supporters.

Sunday, November 29, 2009

On 22 November, the presidents of Azerbaijan, Ilham Aliyev, and of Armenia, Serzh Sargsyan, met in Munich amidst very harsh statements from both sides. Two days before, President Aliyev said that if the talks failed, Baku might reclaim Nagorno-Karabakh by force, and on the day after the meeting, the Armenian president’s spokesman Samvel Farmanian stated that, should tension rise Armenia will recognize the independence of Karabakh. The objective of this rhetoric seems to have been for each side to put pressure on the other and the intermediaries (the OSCE Minsk Group), and to improve their own bar¬gaining positions. The conflict may be resolved, at least partly, within the next few months, and Moscow continues to play a key role in the peace process (President Aliyev had already visited Russia on 24 November).

Aliyev and Sargsyan discussed the details of conflict resolution based on the ‘Madrid principles’ (which envisage the withdrawal of Armenians from the areas surrounding Karabakh, the unblocking of transport routes, and the post-ponement of any decision about Karabakh’s final status). The two presidents were meeting for the sixth time this year, but this was the first time after the signature on 10 October of protocols normalising relations between Arme¬nia and Turkey, which met fierce criticism in Azerbaijan. According to Baku, opening the Armenian-Turkish border would considerably hinder progress in the regulation of the Karabakh issue.

The normalization of relations between Yerevan and Ankara and the Karabakh peace process are undoubtedly related, and the governments involved are currently conducting very intensive consultations about the future structure of the region. Russia remains the most active player in this respect (apart from the countries directly involved). President Sargsyan went to Moscow im¬mediately after the signature of the protocols in October, and the objective of President Aliyev’s recent visit to Russia was to gain the support of Russian President Dmitri Medvedev. (East Week Analytical Newsletter, November 25, 2009).

Friday, November 27, 2009

Martin Roman, CEO of state-owned utility CEZ announced on November 3 that three companies submitted bids to construct the third and fourth reactor blocs for the Temelin nuclear power station along with options to construct a fifth reactor bloc at the Dukovany nuclear power station in a deal that will cost at least USD28 bn.

The three were Russia’s Atomstroyexport, Westinghouse of the US and French company Areva. Roman said he expects a winner to be selected in 2011 and said the third and fourth blocs at Temelin would be scheduled to go online in 2019/20.

What Roman didn’t tell the media is that the Russian government is placing, what some Czech diplomatic sources have described as an unprecedented amount of pressure on Czech officials to select the state-owned Atomstroyexport in what will undoubtedly be the largest nuclear power deal in history.

Vaclav Bartuska, the Czech envoy for energy security issues publicly warned the Czech political elite about the consequences of selecting Russia as the prime contractor since such a decision would tie the Czech Republic’s energy security for at least the next 15 years to a country with an unstable political future.

Czech diplomatic sources have said off-the- record that Bartuska was recently reprimanded by a member of cabinet of Prime Minister Jan Fischer’s caretaker government for what was described as “his excessively pro-Western views on matters concerning energy security.Officials from Atomstroyexport announced on October 30 that if selected the company would farm out up to 70 percent of the work on the Temelin and Dukovany projects to local companies such as reactor builder Skoda JS.

Apart from dominating the Czech market, CEZ i also active in Slovakia, Poland, Hungary, Romania, Bulgaria, Ukraine, Albania, and Turkey.

The management of CEZ which is the largest utility in CEE has recently come under fire for running the company as though it were a private fiefdom that finances the country’s largest political parties – the Civic Democratic Party (ODS) and the Social Democrats (CSSD) which ineffectively govern the country and split the economic spoils as a cartel together with a select group of other private equity companies including PPF and J&T. The latter two firms have been highly active in Russia since the early 1990s and their senior management is known to have links to the former Czechoslovak StB security service and the Soviet KGB.

Over the years journalists have jokingly re-named the country the CEZ Republic.

A Czech court, however, recently ruled that CEZ is a state company and must therefore comply with disclosure practices regarding its business activities.

One of the key people who convinced the Czech government in 2004 to appoint Martin Roman CEO of CEZ was Vladimir Johanes, one of the most powerful lobbyists in the country and son of the last communist-era foreign minister Jaromir Johanes. Vladimir Johanes studies at MGIMO during the early 1990s.

It was also Roman and the CEZ management team that opted to select Russian state-owned TVEL to supply Temelin with nuclear fuel cells beginning in 2010.

The current Czech government has also launched an investigation into a company called CEEI which was selected by CEZ to construct a storage facility for spent nuclear fuel from the Temelin nuclear power station.

The Czech media in September traced CEEI to a Liechtenstein-based company called U.B.I.E. One of the company’s directors is Markus Buchel, the Russian honorary consul to Liechtenstein. Buchel, however, claims that he is not the ultimate beneficiary officer (UBO) of U.B.I.E. and further claimed that he does not know the identity of the UBO.

Since this mounting pile of evidence clearly demonstrates that the management of CEZ does not appear to be working in the best interests of the taxpayers of the Czech Republic which in 1999 joined NATO and in 2004 the EU. It begs the question: In whose interest is the management of CEZ really working for?

Thursday, November 26, 2009

In 2004, as Ukrainians celebrated the “success” of their “Orange Revolution,” few would have believed that five years later the country would be depending on the largess of Russian Prime Minister Vladimir Putin to help save its economy and maintain its gas supply. After all, wasn’t the “revolution” partly a revolt against the meddling of Russian politicians in Ukraine?

Yet, here Ukraine stands, thanking Mr. Putin for his support.

On 19 November, following talks with Ukraine Prime Minister Yulia Tymoshenko, Putin agreed not to levy huge fines on Ukraine for failing to fulfill the “take or pay” provision of its gas supply contract. The provision commits Ukraine to purchase and pay for a contracted level of gas and asses fines if the country does not do so.

But “take or pay” provisions lost favor throughout the world over the last two years, as gas prices and industrial production plummeted. Countries suddenly found themselves buying gas they didn’t need.

Following loud complaints from its European customers, Gazprom gradually has been removing the “take or pay” provisions from most of its European contracts or simply agreeing to ignore them.

This concession has now been made to Ukraine. Russia will not penalize its neighbor for buying approximately 25 percent of its contracted gas in 2009. But even more, Russia agreed to drastically lower the amount of gas Ukraine had previously contracted to purchase in 2010, from 52 billion cubic meters to 33.75 billion cubic meters. This will save Ukraine billions of dollars.

At the same time, Putin told reporters that Russia had agreed to raise by 60 percent the transit price paid by Russia to Ukraine for gas shipped through its pipes to Western Europe. And finally, the price of gas paid by Ukraine reportedly has been set at an average of $280 per 1000 cubic meters, which Gazprom suggests is the average price for Europe.

These concessions and agreements came remarkably quickly compared to previous years – two of which included shut offs of Ukraine’s gas.

Putin suggested that the agreements were relatively simple because of his counterpart. “She’s a tough negotiator,” he said of Tymoshenko following the agreements. “But we’ve always been able to agree, despite all difficulties, and we have managed to keep all of our commitments.”

Message sent and received – Mr. Putin can work with Ms. Tymoshenko.

But Ms. Tymoshenko must work with Mr. Putin. Her country has been badly hit by the global economic crisis and survived for a year only on IMF assistance. But since Ukraine President Viktor Yushchenko supported and signed a 20 percent raise in the country’s minimum wage (over Tymoshenko’s objections), the IMF froze a $3.8 loan tranche. Ukraine, however, still needs support and money or risks international debt default and the inability to pay wages and pensions.

Tymoshenko desperately needed a reduction in gas volumes. Ukraine also desperately needs financial support, and rumors abound that Russia agreed to provide $1 billion to the country’s struggling gas company, Naftohaz, in order to avoid a bond default.

The question that remains unanswered is what Russia expects for its largess in the long-run. And how, of course, Ukraine went from demanding full independence from its neighbor in 2004 to begging for concessions in 2009.

Wednesday, November 25, 2009

Russian Energy Minister Sergei Shmatko declared on November 16 that the Nord Stream pipeline on the Baltic seabed would not be used for diverting gas volumes away from Ukraine’s transit pipelines to Europe. In effect, this statement acknowledges that the Nord Stream pipeline, from Russia directly to Germany, is not a Ukraine-bypass project (Interfax, November 16).

As if on cue, the Gazprom-led Nord Stream consortium confirmed for Western audiences that this project is not about avoiding East European transit routes, but is simply targeting North European gas markets other than those being supplied through the Ukrainian transit pipelines (Wall Street Journal, November 18).

In a similar vein, Russian Prime Minister Vladimir Putin declared on November 14 that the South Stream project –from Russia via the Black Sea to southern and central European countries– is intended to “discipline Ukraine.” This statement, too, implies that the undersea South Stream is meant to pressure Ukraine, not actually to bypass it, particularly as Russian authorities have never been able to identify gas sources to supply South Stream (Interfax, November 14).

These statements mark a political retreat from Moscow’s long-standing threats to circumvent Ukraine through Nord Stream and South Stream. Those threats had aimed to intimidate successive Ukrainian governments into ceding control over the Ukrainian transit system to Gazprom, lest the flow dry up.

Gazprom’s threats were hardly credible, however. All along, the Russian company lacked the means to modernize the Ukrainian transit system (unless it would enlist allied companies in West Europe to finance the upgrades in Ukraine for Gazprom). Moreover, the European Union and Ukraine signed an agreement in March 2009 on upgrading Ukraine’s gas transit system, irrespective of Gazprom. This agreement solidified the European interest and strategic stake in preserving the integrity of Ukraine’s gas transit system and its full-throttle operation for Russian gas deliveries to Europe.

By the same token, Moscow’s disclaimers of intent to bypass Ukraine might discomfit certain European parties to the Nord Stream and South Stream projects. From Germany (main customer for Nord Stream gas) to Slovenia (latest entrant to Nord Stream since November 14), those parties had taken Moscow’s threats to bypass Ukraine seriously. Some conventional wisdom had it that Nord Stream and South Stream were Ukraine-bypass projects and that their viability rested on gas volumes being shifted from the Ukrainian system into the two Stream projects.

At the moment, Russia wants Ukraine to consider an agreement on bilateral cooperation in the gas sector. The Russian draft’s centerpiece is a proposal on Gazprom’s participation in upgrading Ukraine’s gas transportation system until 2030, apparently through a consortium arrangement. As energy minister Shmatko admits, however, Ukrainian approval is far from assured and would have to be sought from several power centers in Ukraine (Interfax-Ukraine, UNIAN, November 17).

The Russian proposal is clearly timed to coincide with Ukraine’s ongoing presidential election campaign. It seems designed to test the position of Ukraine’s political forces and draw support from Moscow-friendly parties and candidates ahead of the January election, when those forces need Moscow’s goodwill more than they would later. It looks like an opening proposal in what Moscow probably anticipates to be a post-election negotiating process. And it adds to the circumstantial evidence that Moscow is not holding fast to the previously intimated strategy of circumventing Ukrainian pipelines through Nord Stream and South Stream.

Ukrainian Prime Minister Yulia Tymoshenko has promptly clarified her position: “No matter where I am, in power or opposition, I will never allow our gas transport system to be privatized, any consortiums to be created, or any other states to encroach on our gas transport system. This is our national treasure, which must permanently remain in Ukrainian state ownership” (Interfax-Ukraine, November 16).

With Russia’s own gas production stagnant and its declared readiness to assume new supply commitments growing, a wide gap has opened between Russia’s actual export potential and its declared promises of gas to external consumers. Some of those potential consumers (notably in German business circles) reckoned with Gazprom’s monopsony to continue with regard to Turkmen gas, so as to free up gas volumes from Russia’s own production for export to Western Europe. That expectation, however, now seems increasingly unlikely to be fulfilled. The financial-economic crisis has compelled Gazprom to suspend its imports of Turkmen gas since April and to downscale its declared offer to import Turkmen gas next year and afterward. Turkmenistan’s Dauletabad field, which accounted for the lion’s share of Turkmen gas exports to Russia, is now being partly reoriented for export toward Iran.

In mid-November, Turkmenistan completed the construction of a new export pipeline from Dauletabad, southward to Iran, with a first-stage capacity of 6 billion cubic meters (bcm) per year and a planned second-stage capacity of another 6 bcm annually. The new pipeline, which runs in eastern Turkmenistan, adds to the existing pipeline in the western part of the country, Korpeje-Kurt Kuy, delivering up to 8 bcm of Turkmen gas to Iran (www.iran.ru, November 20).

Turkmenistan and China are set to inaugurate in December the new gas pipeline from the Bagtyarlik contract area, for an ultimate volume of 30 bcm of Turkmen gas to China via Kazakhstan. Thus, early production from newly opened Turkmen fields is headed in directions other than Russia, in line with Ashgabat’s export diversification policy.

With Russia’s monopsony rapidly losing ground in Turkmenistan, the ambitious Nord Stream and South Stream project look even more questionable. South Stream can hardly expect to be filled with Turkmen gas; and Nord Stream can hardly count on Turkmen gas volumes in Russia to free up equivalent Siberian gas volumes for export to Germany and other possible Nord Stream destinations.

Thus, Moscow now seems to backtrack from its earlier threats to bypass Ukraine through Nord Stream and South Stream. Russia’s own stagnant production, the loss of monopsony in Turkmenistan, and –at least as importantly– the E.U.-Ukraine agreement on upgrading Ukraine’s transit system are at this stage defeating Moscow’s strategy to bypass Ukraine. Accordingly, Moscow is reverting to its earlier strategy to seek control of the Ukrainian system under the guise of a consortium formula that would include Western companies allied with Gazprom.

Tuesday, November 24, 2009

On November 17 Belarus, arguably Russia’s closest ally in the world, sent its delegation to Georgia on a three-day visit to study the situation on the ground and report back to the Belarus parliament and the leadership of that country. Altogether nine parliamentarians arrived in Georgia – six in Tbilisi and three in either of the two occupied regions.

The delegation headed by Sergei Maskevich, Chairman of the Parliamentary Commission for Foreign Relations held high-level talks in the legislative and executive branches of the Georgian government. Maskevich outlined his mission by stating that “it was extremely important to communicate with people who suffered most in the course of the conflicts.”

Apart from talking with Georgian officials, including this country’s Foreign Minister Grigol Vashadze, the members of the delegation also met with those who have been expelled from Abkhazia and Tskhinvali and now live in villages the Georgian government promptly built for them. The Russian media reported that the Belarusians also planned “to conduct consultations in the Russian Duma” upon concluding their mission to Georgia.

The puppet regimes established by Moscow in Abkhazia and Tskhinvali had long asked Minsk to recognize their independence. Alexander Lukashenka, the mercurial President of Belarus, responded by claiming that given the importance of the issue it should first be carefully studied by the Belarusian parliament before the government makes its decision.

Belarus, squeezed between the European Union and the Russian Federation, found itself in a rather uneasy position. On one hand, it is a member of Russia-led international organizations created by the Kremlin in the aftermath of the dissolution of the Soviet Union, such as the Commonwealth of Independence States (CIS) and the Collective Security Treaty Organization (CSTO). – Even more importantly it has been in alliance with Russia as a constituent state of the Russia-Belarus Union – and feels obligated to support its powerful ally.

On the other hand though, Belarus as the European Union’s neighbor and a member of many European and international organizations does not seem to want to take such steps in the international arena that go against the mainstream trend and which might upset the delicate balance between the West and Russia.

The United States’ and the EU’s strong support for Georgia’s sovereignty and territorial integrity and their adherence to the established norms and principles of the European security architecture was a signal that made Mink feel that it should think twice before recognizing Georgia’s disintegration through military means. As reported in the media, Brussels “threatens to worsen its relations with Minsk” if the latter “recognizes Abkhazia and “South Ossetia.” Apparently, President Lukashenka is not willing to risk further isolating his country and jeopardizing Belarus’ participation in the EU’s newly inaugurated and much promising Eastern Partnership Program.

Valentin Velichko, Ambassador of Belarus to Ukraine, has recently said that Minsk would not make any “rash decisions” on the issue of recognition and the topic “is not included on the Belarusian parliament’s agenda.” The spokesman of Russia’s foreign ministry, Andrei Nesterenko, claimed that “[recognition] is a sovereign right of the Belarusian parliamentarians.

Commenting on the issue, President Medvedev of Russia argued that “the Russian Federation has never requested from other countries to recognize Abkhazia and South Ossetia,” although he added that “it would be good for Russia if the list of countries recognizing [them] becomes bigger.”

Earlier, in September, Lukashenka unequivocally blamed the Russian media for the delay in Mink’s recognition of Abkhazia and “South Ossetia” as independent states. He was referring to claims made by Russian newspapers close to the Kremlin that Lukashenka postponed the decision due to Moscow’s refusal to grant $500 million to Minsk as a quid pro quo for the recognition. It is difficult to say whether the Kremlin indeed offered Belarus this amount of money, but it would be fairly logical to argue that Moscow does indeed seek Minsk’s backing on the issue.

It is no secret that by recognizing “the independence” of the Georgian provinces of Abkhazia and Tskhinvali one in fact recognizes not their independence per se but Russia’s hegemony in the post-Soviet space and the emergence of its sphere of influence. Nicaragua and Venezuela apparently already did so since they recently recognized Abkhazia and “South Ossetia” in one form or another.

For Georgia, it is crucial that the number of countries recognizing the forcible change of its borders not increase in the future and the Belarus dimension in Georgia’s foreign policy acquires a new significance. The United States’ and EU’s pressure on Belarus is important, and even decisive, and Georgia’s friendly relations with Ukraine - Belarus’s important southern neighbor - also seems to be instrumental. But Tbilisi, arguably, should galvanize its relations directly with Minsk.

A recent visit by Belarusian entrepreneurs to Georgia and their meetings with Georgian officials, including President Saakashvili himself, represent auspicious developments in this regard. Some analysts even claim that a meeting between Saakashvili and Lukashenka is on the horizon.

Monday, November 23, 2009

Business New Europe recently published an interesting article “An Eastern European island getaway” by Prague-based journalist Jiri Kominek

“For many, Cyprus is synonymous with sunny beaches and Mediterranean flair. Yet as a recent lawsuit by the natural gas trader Itera Group shows, the Greek half of the island is still mired in a post-Cold War shadowy world of Eastern Europeans laundering ill-gotten gains five years after it joined the EU.

Documents compiled by a law firm representing the Netherlands Antilles-based Itera - which has a long, but murky, history of trading gas in the former Soviet Union - claim that a notorious Russian businessman Valery Mikhailovich Korotkov has embezzled over $20m from Itera's various holdings, using 19 shell companies where he is the ultimate beneficiary. These shell companies are registered in Cyprus, Belize and other offshore tax havens, and all of them hold bank accounts in Cyprus.

According to Itera's lawyers, who have filed a complaint with the Cypriot Financial Intelligence Unit (Mokas) over the alleged unlawful activities of Korotkov in the country, all the 19 companies have no other assets other than the capital Korotkov has invested in them using funds allegedly stolen from Itera.

According to Russian police sources, Korotkov and his Russian partners are also under investigation by Russian civil and criminal authorities, who are looking into their alleged involvement in the theft of tens of millions of dollars through illegal transfers and unpaid loans, which were then transferred to offshore accounts in Cyprus and elsewhere.

Short arm of the law

Korotkov has a long history with the Russian authorities: in 1995, he was under investigation for allegedly organising fictitious shipments of crude oil to Belarus, Ukraine and Greece while he was deputy head of TransKreditBank. The investigation revealed that in November of 1994 the Russian Ministry of Finance transferred RUB7.12bn (€166m in today's money) to TransKreditBank for use by the Ministry for Internal Affairs. Allegedly, Korotkov used this money to send fictitious deliveries of oil to refineries in Ukraine, Belarus and Greece. The proceeds of these alleged scams were deposited into Korotkov’s offshore bank accounts. Sources in Moscow say the investigation has been mysteriously suppressed, suggesting that Korotkov has powerful friends in high places. Indeed, Korotkov still resides in Moscow, where bne contacted him via telephone. On the Cyprus allegations, Korotkov tells bne that, "Everything is a misunderstanding and I am willing and able to clear up the entire matter with Russian and Cypriot investigators."

Russian law enforcement sources also tell bne that Korotkov has worked for other Russian and Ukrainian companies involved in the energy sector and for individuals in these companies who have close ties to top officials in the Russian government, to the senior management of Gazprom and, allegedly, to the Solntsevo organised crime syndicate.

Some of his associates have allegedly been involved in supplying pipes at grossly over-inflated prices for the Russian phase of the Blue Stream pipeline, a trans-Black Sea gas pipeline that carries natural gas from Russia into Turkey. While Turkish authorities arrested and convicted senior management of the state-owned crude oil and natural gas pipelines and trading company Botas for overcharging on the local construction phase of the project, nothing of the sort happened in Russia and business has gone on as usual.

Cyprus' Financial Intelligence Unit, Mokas, would neither comment on the Korotkov case specifically, nor on money laundering in general. Yet such activities still plague the new EU member state, which hosts a well-developed, complex web of offshore banking institutions offering a plethora of services including assistance in the creation of shell companies.

Although Cyprus ratified in March the Council of Europe's Convention on Money Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, US and European intelligence and law enforcement officials say Cyprus remains a haven for shadowy enterprises ranging from Islamic terrorists to narco-gangsters, as well as for Russian and other citizens of the former Soviet Union seeking the perfect destination to park, clean and re-export billions in stolen cash. Cyprus has been one of, if not the, largest source of foreign direct investment (FDI) into Ukraine for over a decade. The overwhelming amount of this investment is, in reality, laundered money that was spirited out of the country and then reintroduced to the local economy via construction projects and other ventures.

According to a report published in 2005 by the European Council's anti-money laundering group, or Moneyval, "the money laundering situation has not changed in Cyprus in the last four years." The US government and Brussels have urged the Cypriots to tighten up their supervision of the banking industry, but the lure of easy money appears to be too strong despite the mounting international pressure.

Though the Cypriot government in 1996 established Mokas, headed by the country’s Attorney General, to combat money laundering, success in prosecuting such activities remains largely ineffective. A court in Nicosia in January 2007 freed Russian businessman Vladislav Kartashov who was wanted by the Russian Prosecutor General's Office in connection with the now-bankrupt Yukos oil company. Kartashov, who fled to Cyprus in 2003, allegedly headed three front companies that were accused of helping Yukos evade taxes to the tune of $13bn.

"In Kiev and Kharkiv and other cities in Ukraine, American political consultants who worked against one another in Iowa and New Hampshire and then in the general election are facing off again in a somewhat surreal Eastern European replay of the 2008 campaign.

The firm headed by Hillary Clinton’s former chief strategist, Mark Penn, is helping run incumbent President Victor Yushchenko’s campaign. Meanwhile Paul Manafort, whose firm worked on Republican John McCain’s losing effort, and Tad Devine, a top strategist on the Democratic presidential campaigns of Al Gore in 2000 and John Kerry in 2004, are consulting for Victor Yanukovych, the pro-Russian frontrunner in the polls.

For Penn, Manafort and Devine, foreign elections have been a lucrative source of business for years. But for the Chicago-based media consulting firm AKPD, the contract to help guide Prime Minister Yulia Tymoshenko’s campaign is part of a new, growth area of business that presented itself after the firm helped Barack Obama win the White House last fall.

Also assisting Tymoshenko is John Anzalone, a pollster who worked on the Obama campaign. And Obama's lead pollster in the campaign, Joel Benenson, also worked briefly in Ukraine this year, helping supporters of a rival presidential candidate, former Parliament speaker Arseniy Yatsenyuk, who courted comparisons with Obama (and whose billboards bear a faint resemblance to the iconic posters of Obama by Shepard Fairey)."

Thursday, November 19, 2009

Ukrainian Prime Minister Yulia Tymoshenko announced that the transit fee for Russian gas going to Europe via the Ukrainian pipeline system will be doubled from $1.70 per 1,000 cubic meters/100 kilometers to $3.40. Tymoshenko did not specify when the new transit fee will take effect – presumably it will begin in January 2010.

The announcement came on the eve of Tymoshenko’s visit to Russian Prime Minister Vladimir Putin to discuss the gas trade between the two countries. Tymoshenko has been upbeat in her public statements about the reliability of the Russian Federation to meet its commitments in the gas trade and praised Putin for “never letting her down.”

Ukrainian President Viktor Yushchenko however, takes a less benign view of the gas trade between the two countries. In an open letter to Russian President Dmitri Medvedev on November 19 posted on his website, Yushchenko urges the Russian president to consider changing the January 2009 gas supply and transit contract which he considers as harmful to Ukrainian interests.

Gazprom, meanwhile, has threatened to demand some $8.5 billion in penalties from Ukraine for not fulfilling its 2009 gas purchase contract. Ukraine has purchased some 14 billion cubic meters less than what it contracted for in 2009. The Ukrainian side is disputing this figure and many analysts fear that a combination of the increase in the transit price and the unwillingness of Ukraine to pay the alleged penalties might result in another gas war” which could lead to a shut-off of gas supplies to Europe in the coming winter months.

Moreover, East Week, published by the Polish Center for Eastern Studies reported that Tymoshenko has admitted that extending co-operation with the IMF is Ukraine’s only anti-crisis program. After the suspension of the program, Ukraine is unlikely to receive short-term support from other international institutions and Western states, which have made their loans conditional on Ukraine’s continued co-operation with the IMF.

No support would be forthcoming from the European Commission (€610 million), the World Bank (US$500 million) or the EBRD (the first payment of US$300 million under the loan to Naftohaz) should be expected until Ukraine resumes co-operation with the IMF. Both Tymoshenko and Yushchenko had hoped on IMF funds to help them pay off gas debts to Russia and not force them to spend their hard currency reserves reputed to be some $30 billion.

Wednesday, November 18, 2009

The following article by Jamestown senior fellow Vlad Socor appeared in the Eurasian Daily Monitor and the full text can be read on the EDM website.

On November 13 in Sofia, Azerbaijan’s President Ilham Aliyev and his Bulgarian counterpart Giorgi Purvanov witnessed the signing of agreements of intent on the transportation of Azerbaijani gas to Bulgaria and onward to Europe. The agreements’ centerpiece concerns transportation of compressed natural gas (CNG) from Azerbaijan, via Georgia and the Black Sea, to Bulgaria and farther into European Union territory. This solution, if implemented, would avoid the existing impediments to transit via Turkey.

Azerbaijan’s and Bulgaria’s Energy Ministers, Natig Aliyev and Traicho Traikov, signed a memorandum of inter-ministerial cooperation on gas export and transportation; while Elshad Nassirov, vice-president of Azerbaijan’s State Oil Company (SOCAR), signed with the Bulgartransgaz (state-owned transmission pipelines’ operator) general manager Ivan Drenovchiki a memorandum of understanding toward those goals.

At the signing event, Purvanov placed the CNG project within the broader context of the E.U.-planned Southern Corridor for gas transport to Europe. This envisages an integrated Caspian-Central Asian solution, with Azerbaijan as a transit country (as well as producer) for Turkmen gas to E.U. territory. For his part, President Aliyev noted that this project would “make us [Azerbaijan] a direct supplier to the European Union ... advancing the E.U.-Azerbaijan strategic partnership on energy” (BTA, November 13).

CNG is an unprecedented and untested solution for transportation by tanker ships or any large-scale transportation in Eurasia. Compressed gas has only been used in small volumes for road transport thus far. According to officials from both sides at the signing, CNG transportation across the Black Sea necessitates specialized tankers that are more expensive to build, compared to liquefied-natural-gas (LNG) tankers. However, the CNG delivery mode does not require liquefaction of the natural gas and its re-gasification, obviating the need for those expensive installations and processes. The decompressed gas can be delivered directly into the recipient country’s pipeline network, for national use or transmission to third countries. This cost advantage may well offset the investment costs of CNG tankers, according to the same officials.

Azerbaijan intends to conduct detailed research on CNG transportation on the proposed Georgia-Black Sea-Bulgaria route (Trend Capital, November 14). Azerbaijan and Bulgaria will jointly commission a feasibility study, to be drawn up in short order.

Subject to the feasibility study’s conclusions, Azerbaijan envisages the possibility of delivering 7 to 8 billion cubic meters (bcm) of gas annually, some of it to Bulgaria, but most of it farther into E.U. territory. According to Azerbaijan’s State Oil company president Rovnag Abdullayev, the company considers building a gas-pressurizing installation in the Georgian Black Sea port of Kulevi as a starting point for CNG transportation by tankers to Bulgaria and potentially also to Romania (Trend Capital, November 14).

Apart from CNG, Azerbaijan and Bulgaria confirmed on November 13 their intention to sign a contract for 1 bcm of Azerbaijani natural gas to be exported to Bulgaria from 2011 onward. This depends on continuing advance of the Turkey-Greece-Italy Interconnector (ITGI) and the completion of a 90 kilometer pipeline link from Greece to Bulgaria.

The Interconnector has advanced as far as the Turkey-Greece link and should continue through Greek territory westward, for an undersea link to southern Italy and a projected capacity of some 12 bcm annually. The 1 bcm of Azerbaijani gas to Bulgaria is being envisaged separately from Bulgaria’s quota of Nabucco gas; one would not prejudice the other.

Bulgaria’s government under Boyko Borisov, in office since July, has suspended three major joint energy projects with Russia –including the South Stream gas pipeline project– pending a review of their terms. The new government is looking into possible corruption deals behind those projects and also questions their wisdom in terms of energy security for Bulgaria (EDM, August 10).

Azerbaijan’s agreements of intent with Bulgaria form one aspect of Baku’s recently initiated search for multiple gas export options (EDM, July 2, 17, October 15, 22). Baku’s search is being prompted by slow movement on the Nabucco project and Ankara’s refusal thus far to sign a transit agreement for Azerbaijani gas. Russia and Iran are two active options. The route via Georgia and the Black Sea to Bulgaria adds a further possible option.

Tuesday, November 17, 2009

Vienna, November 17 – Prime Minister Vladimir Putin, who has often described the collapse of the Soviet Union as “the greatest tragedy” of the 20th century, has now said that the “reunification” of Georgia has “already been decided,” a suggestion some of his listeners believe was a call for restoring Moscow’s control over Georgia and even the former USSR as a whole.

In an intriguing commentary published in yesterday’s “Gazeta,” Bozhena Rynska describes both the celebration of the 80th birthday of longtime Soviet and Russian official Yevgeny Primakov and Prime Minister Vladimir Putin’s two very different toasts on that occasion.

The celebration took place at the Center of International Trade. Among those in attendance were Vice Prime Minister Sergey Ivanov, KPRF leader Gennady Zyuganov, Governor Valentina Matviyenko, Federation Council First Vice Speaker Aleksandr Torshin “and other government people of the first rank,” Rynska said.

Primakov, she continued, has close ties to Georgia – he spent part of his childhood there, his first wife was a Georgian, and his mother was a Georgian Armenian – and consequently it was not surprising that many of the guests at his birthday celebration were people “with Georgian roots.”

Among them were former foreign minister Igor Ivanov (whose mother was Georgian, current foreign minister Sergey Lavrov (whose father was a Georgian Armenian), the oligarch Shalva Breus, Academician Viktor Gelovani, the singer Nani Bregvade, sculptor Zurab Tsereteli, and the master of ceremonies (“tamada”) was Moscow chief cardiologist David Ioseliani.

Rynska noted that “throughout the entire evening, Ioseliani the tamada called Putin who was sitting next to Primakov the first person of the state,” a description that others in attendance followed, including apparently some who are serving officials and thus know that in protocol terms at least that title belongs to someone else.

In his first toast, Putin said “the history of Russia is complicated and at times bloody,” the prime minister said. “But in it,” he continued, there are its Primakovs, and therefore these blood lettings end and sometimes do not even begin.” Primakov responded in kind. He said, Rynska continued, “that he will always be devoted to Mr. Putin because the latter saved Russia.”

There followed entertainment including singing. And then Putin made his second toast. He “immediately warned that he very well understood that everything said will go beyond the walls of this hall. More than that,” Rynska continued, the Russian leader indicated that he was “counting on exactly that.

Following that introduction, Putin declared that “the question of the reunification of Georgia had been decided. And that there are no questions which we cannot resolve.” Primakov, Putin continued, “is involved with this question,” a statement that sounded to many in attendance as a direct appointment in the tsarist style.

After some more singing, Putin left the hall, and the remaining participants began to talk among themselves as to what the prime minister’s intentions had been. Some of those with the closest Georgian ties concluded that Putin “’had said that he will return everything to us!’ That is, Rynska said, they heard exactly what they wanted to hear.”

“Those not affiliated to Georgia interpreted [Putin’s] programmatic toast entirely differently.” They heard as a promise that “all that we consider ours will remain ours.” And a few of them concluded that what Putin had committed himself to was “the restoration in a new form” of the entity that was once called “the Soviet Union.”

Putin’s remark certainly was enigmatic enough to permit these various interpretations. Indeed, that may have been exactly his intention. But his participation in a session with so many Russians who have Georgian roots and ties will certainly be read in Tbilisi as yet another indication that the Russian prime minister has no plans to reduce pressure on Georgia.

At the very least, it suggests that Putin’s understanding of Russia’s sphere of influence includes not just Abkhazia and South Ossetia, which Moscow has already recognized as independent, but also the remainder of Georgia and the remainder of the former Soviet space, an understanding that will exacerbate rather than calm tensions in many other capitals as well. From Window on Eurasia.

On November 17 Georgia sent 170 servicemen to Afghanistan to participate in NATO’s International Security Assistance Force (ISAF) operation. The combat troops will serve under French command near the Afghan capital Kabul. According to Georgian media, Mikheil Saakashvili’s pro-Western government plans to dispatch an additional 700 troops by February 2010 to strengthen the American units in various parts of the war-torn country.

A day earlier, during the official ceremony at the Vaziani military base near Tbilisi, Georgia’s Defense Minister Bacho Akhalaia highly praised the preparedness and morale of the Georgian military who had been trained by American instructors for months. “We fully realize that ISAF is NATO’s top priority…Peace and stability in Afghanistan is our common objective,” Akhalaia said.

In September, Georgian media reported that 40 instructors from the U.S. Marine Corps were engaged in the training of Georgian troops for the Afghan campaign and “the two-year training program was designed to prepare four Georgian battalions in total.” Needless to say, Russia views any American involvement in training Georgian troops with utmost suspicion and even the very presence of the American military instructors on Georgian soil is an irritant to the Kremlin.

As the Obama Administration is in the process of developing a new U.S. strategy for Afghanistan and a decision on the number of troops required for winning battles as well as the hearts and minds of the Afghan people is still under deliberation, Georgia’s contribution to the West’s cause cannot be undervalued.

Meanwhile, not all Georgians agree that sending troops to a remote country is the right - and timely - decision for a nation whose very survival is under a big question mark. Overwhelmed in the battlefield in August 2008 by Russia’s tens of thousands of troops, countless tanks and airplanes as well as warships on the Black Sea, Georgia, a good number of Georgians allege, does not have the luxury to sacrifice itself to others’ cause.

President Saakashvili has a hard time explaining to his fellow citizens that for Georgia, with 20 percent of territory under Russian occupation and Russian troops stationed as near as a few dozen miles from Tbilisi, helping the United States and its NATO allies in Afghanistan is an absolutely necessary step.

Before the Russian military aggression Georgia had as many as 2,000 troops in America’s other battlefield, Iraq – the third largest contingent after the U.S. and U.K. – and boasted that it was not a mere consumer but a sizable provider of security in today’s troubled international system.

The Georgians were shocked when they learned that Germany’s and France’s decisive ‘no’ at NATO’s Bucharest summit in April 2008 denied their country a much needed Membership Action Plan (MAP) that could pave the way to coveted membership in the Western alliance. Emboldened, Moscow did not wait long before attacking Georgia a few months later, in August 2008.

Yet again, President Saakashvili’s government is trying to rationalize its decision to help the United States and the West by explaining to its people that participation in NATO’s operation in Afghanistan as in the past about Georgia being a responsible international player, a de facto NATO ally and a nation that does not simply request security from the West but is capable of providing one.

Meanwhile, as long as Georgia remains split into three parts and is excluded from the Western collective security architecture, many Georgians fear, that their country’s sustainability as a stable, democratic and free nation is an objective, not an accomplished fact.

Monday, November 16, 2009

Gazprom, the Russian gas giant, has been caught in a financial vise throughout 2009. It’s main market in Europe for gas shrank by 32 percent in the first half of 2009. Part of this can be explained by reduced demand due to the world economic crisis, yet Gazprom’s competitors have increased sales of pipeline gas and LNG to European customers during this same period. Norway increased its sales by 12 percent from January to August, and in August volume rose by 51 percent. Qatar increased LNG sales by 58 percent in January-August and in August by 173 percent. Algeria increased its sales to Europe by 7 percent as did Trinidad and Tobago.

The main reasons for these increases have been the overabundance of gas in the United States due to large shale gas production and the fact that LNG spot prices were lower than Gazprom’s price. Gazprom management however remains optimistic about the future demand for its gas and predicts that soon it will once again export 240 billion cubic meters (bcm) of gas and that this figure will remain stable until 2030.

Oil and gas analysts are not convinced. The Russian daily Kommersant quoted Valery Nesterov from Troika Dialogue as saying that if Gazprom manages to sell 180-200 bcm yearly up to 2030 the company would be highly successful. Gazprom is also facing unexpected increases in gas production and transmission costs.

According to the East European Gas Analyst, “Compared to the average costs of 2008, the reported gas production cost of Q2-2009 was up 33% and transmission cost per 1000 cubic meters of marketed gas soared 36%. Note that the growth from Q1 to Q2-2009 cannot be explained by the drop in production and sales.”

How these projections will impact Gazprom’s Nord Stream and South Stream pipeline projects is difficult to say. Some analysts claim that by 2012 pipelines and LNG terminals might have to ship some 200 bcm of gas less than they presently do.

Friday, November 13, 2009

“First, the golden heads left, then, the golden hands. Now, we have only gold teeth left.”

I first heard this sad quote in Tajikistan in 1993, as the Tajik civil war pushed many a golden head out the country. One of those golden heads was my good friend Oleg Panfilov, a prominent oriental scholar, journalist, writer and human rights activist.

Tajikistan lost a great deal, when people like Oleg left. Since then Oleg has worked in Sweden, Iran, and in Russia. In Russia, he launched aNGO of which he has the right to be particularly proud: the Center forJournalism Under Extreme Conditions (CJUEC).

Not only does this body protect journalists it often helps them escape thetight clutches of Russian “justice.” The Center also has created and maintains a comprehensive system of legal education and support for Russian journalists.

Over the last decade I have witnessed the unique role Oleg’s organization has played. Recently I've learned that Oleg Panfilov, Secretary of the Union of Russian Journalists, has moved to Georgia.

Why? Let me put it in Oleg’s own words: “In Russia, people can no longer speak up their minds; the media serve to disseminate lies and falsehoods, while the situation with freedom of speech is particularly hard.”

“Georgia is a much freer country than Russia and there are goodprospects for the development of journalism and society in the country. In Russia, such prospects are becoming fewer and fewer. I’m quite disappointed about my chances of working in Russia.

While Oleg and I are friends, but we don’t always see eye-to-eye. One thing we agree to disagree on is President Mikeil Saakashvili. Oleg endorses him, I see him as another version of Putin---two of a kind, really.

But we both agree that Georgia is a much freer country than Russia underPutin.We both agree that Russia’s prospects under the incumbent regime aredisappointing. In fact, they are rapidly approaching zero.

So, now it’s Russia that is losing golden heads, including Oleg’s.Woe to acountry that keeps only proverbial gold teeth. Honor to a country that welcomes them. What lies in store for Russia, once the brain drain depletes the country?

A normal and not unprecedented outbreak of flu has added to political tension in Ukraine during the presidential election campaign. The flu outbreak should not be normally a cause for alarm as fewer people had died as of November 1 than by the same date last year. In February 2008 Ukraine was far closer to an epidemic than today.

Why then the exaggerated panic and conspiracy theories about the regional nature of the flu outbreak? Two factors account for this.

Firstly, in February 2008 relations between President Viktor Yushchenko and Yulia Tymoshenko were not as strained as they are today. Today, Ukrainian experts and mass media openly talk about Yushchenko’s obsession with Tymoshenko who he attacks on a daily basis and the President intervenes in areas that are constitutionally within the governments area of responsibility.

Yushchenko signed into law social populist legislation that threatens the IMF stand-by agreement and thereby opens up the possibility of Ukraine’s default. At a November 11 meeting with G8 Ambassadors Tymoshenko openly warned about the dangers that lie ahead for Ukraine and in an unprecedented move said she would not implement the populist legislation.

Yushchenko’s obsessive dislike of Tymoshenko has led to a growing number of Ukrainian experts, including Interior Minister Yuriy Lutsenko, alluding to Yushchenko as a “technical candidate” of Party of Regions leader Viktor Yanukovych whom Yushchenko has never once criticised during the last six months. Lutsenko believes that Yushchenko’s strategy is to undermine Tymoshenko’s election chances, through for example daily criticism of her and the imposition of a state of emergency that would postpone elections.

After Yanukovych is elected President he has promised to disband parliament, hold pre-term elections and establish a new coalition and government. Lutsenko believes that the new government would be headed by Yushchenko.

Secondly, what makes this years flu outbreak different is that it is highly concentrated in Western Ukraine. As of November 2, the eight oblasts of Western Ukraine had over 200,000 cases of flu compared to only 30,000 in central, 6,000 in southern and 10,000 in eastern Ukraine.

Rumors have abounded that this is suspicious and a plot to undermine Tymoshenko’s election campaign as Western Ukraine is the heartland of her support. A small but growing number of western Ukrainian senior medical officers have questioned whether the fact that the outbreak is regionally concentrated means it is of an “organized nature”. Why is swine flu not spreading beyond Western Ukraine they muse?

Ukrainian Security Service (SBU) officers who talked in anonymity to the Jamestown Foundation are also suspicious. An SBU counter-intelligence general was of the opinion that the outbreak had the look of a “spetsoperation”. Although based in Kyiv his colleagues in Western Ukraine were sending him daily reports that made him increasingly suspicious.

The SBU counter-intelligence officer offered to provide testimony from a Ukrainian who lived in the town of Stebnyk in Lviv oblast who allegedly witnessed suspicious individuals that he believed were linked to the flu virus. The Jamestown Foundation will seek to interview him.

A former senior level member of Leonid Kuchma’s presidential administration told Jamestown Foundation that during the Orange Revolution certain SBU officers had approached Kuchma and offered to disperse the Orange Revolution crowds by spreading an undisclosed “chemical agent” among them. Kuchma had turned down the offer because it would have led to a loss of life for which he would have been held responsible (Internal Troops sent on November 28, 2004 to disperse the protestors were given the order by Prime Minister Yanukovych after Kuchma also refused to support this step).

During the 2004 elections and Orange Revolution the SBU was divided into three groups. One worked with the opposition and unofficially taped Yanukovych’s election campaign headquarters. The tapes were transferred to Oleh Rybachuk after Yushchenko was elected (see ‘Yanukovych-Gate Unfolds After Ukrainian Elections’, Eurasian Daily Monitor, vol.1, no.139, December 3, 2004).

A second group stayed neutral and a third remained loyal to Kuchma. The latter group retained links to Russian intelligence and may have been behind Yushchenko’s poisoning that investigators believe was administered at SBU Deputy head Volodymyr Satsyuk’s dacha. Satsyuk fled to Russia after Yushchenko’s election with his SBU files which have been drawn upon by a parliamentary commission controlled by the Party of Regions that recently sought to claim that the poisoning had not taken place and was in fact a “CIA operation”.

Ukrainian media and experts have pointed to the analogy of Russia where the FSB was accused of planting bombs that blew up apartment buildings, terrorist attacks that were then blamed on “Chechen terrorists”. These conspiracy theories are rampant because of the inability to resolve the mysterious 2004 poisoning of then opposition candidate Yushchenko, years of political instability, and Yushchenko’s blatant use of the outbreak to undermine Tymoshenko.

Western Ukrainian medical officers believed that the answer to the question of why the outbreak was highly concentrated lies less in the medical than in the political sphere. This is an illusion to the calls by the secretary of the National Security and Defence Council and Presidential Secretariat for the introduction of a state of emergency that would postpone elections until local elections in May. According to Segodnya (November 10), Ihor Tarasiuk, the head of Yushchenko’s campaign, successfully argued against the step and the decision was postponed.

Such a scenario would severely undermine Tymoshenko’s election campaign, which it would seem is Yushchenko’s only goal.

Thursday, November 12, 2009

Paul Gobles piece on the differences between Ukraine and Russia deserve a wider readership. The full text can he found on www.windowoneurasia.blogspot.com

Tensions between the Russian and Ukrainian governments are “not an argument between colonizers and the enslaved” but rather a dispute between those who see the state and its continuity as more important than the individual and liberals who put their faith in individuals and society, according to Ukraine’s ambassador in Moscow.

“Rational” people, the Ukrainian diplomat says, “cannot but be surprised that such questions of a humanitarian nature and not problems of economics and security define the tonality and content of Ukrainian-Russian dialogue.” But the reason is that since 1991, the two countries “have become very different.”

For Ukrainians, he continues, the entire Podrabinek case appears “extremely strange,” but a careful examination of it shows that over the last 18 years, Ukrainians and Russians, “while preserving a multitude of common interests have begun to set themselves apart both by models of societal development and by their worldviews.”

For the Russian “establishment, Grishchenko suggests, “the state is considered an important super-values, which forms around itself a system of firm values and priorities.” And equally, the Russian elite has accepted the “idea of the uninterrupted quality of the process of state construction.”

What that means, the ambassador says, is that “any power which has been able to achieve a strong position in Russia and to obtain legitimacy in the eyes of its own citizens will become an inalienable part of the historical fate of Russia and ‘the Russian path.’” Thus, 1991 does not represent a moment of discontinuity for Russians the way it does for Ukrainians.

Many Russians as a result do not know what the Day of Russia on June 12th means because “the Russian political leadership avoids any reference to the events of August 1991 as ‘a democratic revolution.’” For both, “contemporary Russia didn’t break out of ‘the prison house of peoples’ but only appeared in place of a system which did not withstand the test of history.”

This attitude does not mean that the current Russian powers that be want to restore what was, but rather it suggests that “for the Russian elite, the underlying idea remains the unbroken quality of the state forming process and an orientation on the greatness of Russia as the key goal” of the current leaders.

“In Ukraine,” he says, “the historical process is not conceived of as integral. On the contrary, the period in which Ukrainian lands were within the Russian Empire and the USSR are viewed primarily as stages of national historical development which had for the most part negative consequences.”Such a “lack of correspondence” in the assessment of the past “naturally leads to conflicts and contradictions between Ukraine and Russia concerning the interpretation” of any particular event. But in saying that, Grishchenko goes on, “it is important to correctly understand the internal essence of these discussions.”They are “not so much an argument between colonizers and the enslaved as a dispute between those who focus on the state as the most important thing and liberals.” Thus, for the former, Stalin’s industrialization and the great terror “exist as it were in parallel worlds,” but for the latter, the two can never be divorced one from the other.

These differences in worldview, in turn, affect politics. On the one hand, Ukraine and Russia have a very different political system. In the former, voters are unwilling to give any part an overwhelming majority and thus have contributed to political instability, while in the latter, the electorate has been prepared to do just that and helped erect the power vertical.

And on the other, the two countries dealt with the greatest crises since 1991 in very different ways: In 1993, Moscow used force to resolve the conflict between the president and the parliament; in 2003-2004, Ukrainians dealt with their political problems in a very different and far more peaceful way.Such differences, Grishchenko argues, reflect “deeply held predispositions in the consciousness of the government elites of the two related peoples,” not only concerning the goals that are the most important but equally significant between the methods that each views as appropriate to achieve its aims.

The elites in each country must recognize these differences if they are to be able to live and work together as they should. “Ukrainians,” their ambassador says, “are seeking to live with Russians as good neighbors in a well-ordered little village where people listen to advice from one another but do not seek to instruct or give orders.”

If one thinks about this, Grishchenko continues, “we are like adult brothers who after the age of 18 left their common home, sincerely love one another, but conduct their affairs independently, talk with one another, but resolve all questions on their own” rather than acting as they did when they were children.Unfortunately, “it is sometimes suggested that we should again live in a single communal apartment where one of the residents controls the gas and the knobs in the common kitchen,” but the ambassador says, “I am convinced that ‘the times of communal apartments’ have passed away together with the Soviet Union.”

Moreover, he concludes, “Ukraine and Russian in their relations will inevitably move further and form new bases for cooperation and friendship if they acknowledge that we are not the same but that in our interrelationships, we can be strong and successful in the contemporary world.”

In a May 2008 blistering editorial, three MEPs criticized Ukrainian President Viktor Yushchenko for his continual battles with Prime Minister Yulia Tymoshenko. MEPs Elmar Brok, Jas Gawronski and Charles Tannock wrote, “There is no more depressing sight in politics than a leader who, desperate to cling to power, ruins his own country in the process.”

Today, it seems that we can adjust the sentence to the following: “There is no more depressing sight in politics than a leader who, knowing he will soon lose power, ruins his own country in the process.” Yes, the sentence may be a tad hyperbolic – President Yushchenko isn’t likely to “ruin” his country. But, as he heads into a presidential re-election campaign with 5 percent support, he certainly seems to be doing enough damage.

This week, in the midst of a severe H1N1 outbreak that may have killed 213 people, Yushchenko announced he will veto legislation designated to provide $125 million for flu medications and hospital equipment.

Prime Minister Tymoshenko dramatically responded:“Each person who dies today is the personal responsibility of the president.” She suggested (without providing evidence) that the government was forced to cancel delivery on a shipment of ventilators and incubators that had arrived at the border from Austria.

The President claimed that the current budget is underfunded by 30% and, therefore, the country cannot afford the cost of the measure. To sign it, he said, will result in “money printing.”

The pre-election maneuver was passed by parliament over the objections of Tymoshenko, who called it “an atom bomb under the finances of the country.” The Ukrainian government suggested the measure would add $10 billion of expenditure to the already deficit-laden budget by the end of fiscal year 2010.

Indeed, the measure ordered the government to immediately raise wages and pensions (officially on 20 Oct 2009), despite the 2009 budget being approved by parliament with the lower figures.

The IMF responded quickly to Yushchenko’s signature on the legislation, “which is at odds with the objectives of the authorities’ program.” The Fund delayed disbursement of a $3.8 billion tranche from its $16.4 billion bailout program. This tranche partly was to be used to pay Russia for gas.

Of course, this triggered a warning from Russian Prime Minister Vladimir Putin that Russia will turn off Ukraine’s gas if it fails to pay on time next month. He also warned that Russia is prepared to turn off gas to Europe if Ukraine taps the transit lines. Ukraine appears to have no means to pay for November’s gas, after paying on time all through this year.

To be sure, there is support in Ukraine for raising wages and flouting the IMF, buoyed by worries of government corruption. But, over the last two weeks, Yushchenko has added up to $10 billion to the country’s deficit, taken a stand against flu medications while doing nothing to stem the virus’ tide, invited criticism from Russia and created concerns in Europe over gas payments. Well done, Mr. President.

Wednesday, November 11, 2009

On November 9, the Ukrainian-Russian intergovernmental commission met to exchange views on a new Intergovernmental Gas Agreement between the two countries, which if agreed upon, would replace the 2004 agreement now in effect.

The Ukrainian side needs such a new agreement in order to change the terms of the gas contract signed between Naftohaz Ukrayina, the Ukrainian state-owned energy company, and Russia’s Gazprom, on January 19, 2009. This contract is in effect until 2019.

In 2009 Ukraine has been unable to buy the full quantity of gas specified in the contract (40 billion cubic meters (bcm) and might wind up owing Gazprom about $1.66-1.82 billion under the take or pay clause.According to Ukrainian and Russian estimates, Ukraine might only purchase 24 bcm in 2009.

The Russian side has also broken the terms of the January 2009 contract under which it was obligated to send 110 bcm of gas to Europe and in the first 10 months of 2009 only shipped 74 bcm. Gas going to Europe via Ukraine however, is not covered by a “send or pay” clause and the Ukrainians stand to lose millions of dollars in transit revenue.

Earlier this year Russian Prime Minister Vladimir Putin agreed not to charge Ukraine any penalties for failing to buy the contracted amount of gas. However he also stated that he was against changing the January 2009 contract.

The Ukrainian side has floated the idea that Russian gas bound for Europe be subject to a “send or pay” clause, a proposal which Gazprom has rejected and, according to Russian specialists, is not at all interested in any changes to the existing contract, even if a new intergovernmental agreement is signed.

It appears that Gazprom might have the last word in the debate regardless of what the two governments sign.

Tuesday, November 10, 2009

On November 9, as the Germans were celebrating the 20th anniversary of the unification of their homeland and the Western world was engaged in jubilant festivities with the old and new leaders of Russia to commemorate the end of the Cold War, Moscow’s influential news agency ITAR-TASS broke a truly sensational story. The U.S., according to ITAR-TASS, had offered Georgia arms and munitions worth more than $100 million.

The story was soon picked up by virtually the entire Russian media with various flashy headlines which stated that “according to Russian intelligence, the United States has offered Georgia arms and munitions worth more than $100 million.”

According to ITAR-TASS, “in response to Tbilisi’s request for military aid” “a large set of weapons, military hardware and ammunition” is planned to be delivered to Georgia by Chicago-based Barrington Alliance, Inc., “with the knowledge and approval of the U.S. government” but “not directly by government agencies” themselves, and that an anonymous source from the Russian intelligence service told ITAR-TASS that the above corporation “sent Georgia a proposal on the delivery of air-defense and antitank missile systems as well as machine guns and ammunition,” namely, such sophisticated antiaircraft and antitank systems as Patriot-3, Stinger, Javelin and Hellfire-2.

To make its story more credible, ITAR-TASS claimed that the general staff of the armed forces of the Russian Federation confirmed the information shared by the anonymous source with the news agency. In addition, the chief of Russia’s military intelligence, Aleksandr Shlyakhturov, informed ITAR-TASS that “Georgia continues to receive armaments from NATO countries, Israel and Ukraine”

When reporting the same story on November 9, one of Russia’s most read Internet newspapers Gazeta.ru came up with this catchy headline “The Russian Intelligence Services Accuse the United States of an Attempt to Sell Georgia Weapons Worth $100 Million,” which makes clear the most important issue of Russia’s discontent – America’s close cooperation with a country Moscow wants to isolate.

The Georgian government swiftly responded to the story. Within hours, Georgia’s foreign ministry came out with a commentary neither denying nor confirming the alleged arms deal with the United States. Rather, the department of press and information of the foreign ministry said in its statement that “beside this announcement [alleging Georgia’s rearmament] Russia’s Deputy Foreign Minister Gregory Karasin recently stated that the United States continues to provide weapons to Georgia and this compels us to take appropriate measures.”

In the same statement, Georgia requested from the Russian Federation that the latter “instead of commenting on the relations between other countries, stop increasing its military potential in occupied Georgian territories, respect the principles and norms of international law…and withdraw its troops from Georgian soil.”

Russia has long been trying to prevent the strengthening of Georgia’s military ties with other countries and first and foremost with the United States, and it seems Moscow is deeply concerned that despite its tireless efforts Tbilisi’s cooperation with Washington has not receded. So far, high-ranking American officials have claimed that American military assistance to Georgia has exclusively been in the form of training Georgian troops and helping Tbilisi in strategic planning and logistics.

Nonetheless, Moscow looks alarmed by Washington’s pledge – as U.S. Secretary of State Hillary Clinton said in Moscow – that it “will help the Georgian people to feel like they can defend themselves.”

As U.S. Assistant Secretary of Defense for International Security Affairs Alexander Vershbow also affirmed, “America wants to have Georgia as “a strong, independent and sovereign partner that will be able to defend itself.”

Georgians believe that their defeat during Russia’s military aggression in August 2008 was mostly due to their county’s poor antiaircraft and antitank capabilities. Furthermore, many think that had Georgia been better prepared militarily, Russia would not have resorted to war in the first place fearing high costs and mass casualties. Nevertheless, if Georgia indeed plans to buy the above-mentioned sophisticated American systems, they must be viewed as just one way of preventing Russian military aggression in the future.

Without becoming a full member of the Western collective security system with all the political, military and diplomatic assurances it entails, even a well-armed Georgia will hardly be able to prevent war with Russia and secure its sovereignty, territorial integrity and foreign-policy orientation in the long run.

Monday, November 9, 2009

Georgians were recently shocked when they learned of more kidnappings of ethnic Georgians, this time from the village of Tirdznisi near the Russian-occupied Tskhinvali region.

Kidnapping has been a usual Russian practice ever since Russia invaded Georgia in August 2008 and seized nearly 20 percent of its territory. But the latest abductions are truly unprecedented since they involve four Georgian schoolboys. Giorgi Romelashvili and Aleko Sabadze are 14 years of age while Victor Buchukuri and Levan khmiadashvili are 16 and 17, respectively. All of the boys attend high school in Tirdznisi, which is under Georgian control and well beyond the zone of Russian occupation.

Outrage, caused by the kidnapping, quickly spread throughout Georgia, involving the government, NGOs and the general public. As Georgia’s Minister of Education Nika Gvaramia told Rustavi-2 TV late on November 5, the government of Georgia has already alerted the international community through diplomatic channels and requested the intervention of the European Union’s Monitoring Mission (EUMM) in Georgia and other “influential international organizations” since “we have limited tools of our own to free the kidnapped boys.”

The schoolboys are currently in the town of Tskhinvali and the government-controlled Russian media is silent about the fact, apparently waiting for “appropriate instructions” from the authorities on how to convey the story to the Russian public. A miniscule amount of information put on its website by the Russian news agency Regnum, itself close to the Kremlin, stated that the four Georgians were arrested on charges of “violating the state border and illegally possessing and carrying weapons and explosives,” adding that the Georgians detained late on November 4 had four hand grenades and explosives.”

Five Georgians were freed within hours of their abduction while the freeing of the 16 Georgian citizens became a saga of international proportions, involving tedious negotiations by representatives of foreign governments and international organizations, the most instrumental of which was the EUMM in Georgia.

In both cases, armed Russian soldiers, or their “South Ossetian” proxies entered Georgian-controlled territory and arrested residents engaged in their traditional activities of felling trees or herding. In yet another incident on November 1st, this time in Georgia’s north-western Abkhazia region, the Russian forces kidnapped two Georgian citizens who tried to enter the neighboring town of Zugdidi to sell hazelnut. The fates of the two men, whose produce had been extorted, still remains a mystery.

Even more outrageous was the case with Ruzgen Khasaia, a Georgian citizen living in Abkhazia, whose house was burnt down on November 4th by Russian troops after the man refused to give up his harvest of hazelnut. Trespassing of the “Georgian-Abkhaz border” was the official accusation against Khasaia and the harvest was requested “as a fine for illegal activity.” Georgia’s Rustavi- 2 TV channel reported that Khasaia’s neighbors were forcibly taken to watch the burning of his house, supposedly, “to prevent disobedience in the future.”

Analysts believe that Russia pursues several objectives through these and other cases of kidnapping and extortion, as savage and unacceptable they may seem to the international community. It is quite possible that Moscow is trying to discredit President Saakashvili’s government by showing its inability to provide security to Georgian citizens living in territories adjacent to the zones of Russian occupation in Tskhinvali and Abkhazia.

Russia might also want to force the Georgian citizens living there to abandon their villages, which could make room for an expansion of the zone of Russian occupation. When it comes to Georgian nationals living in Abkhazia, Moscow allegedly would like to see their contact with the rest of Georgia remain as limited as possible on the one hand and their disobedience to Russian directives as strictly punishable on the other.

Besides, the Kremlin is apparently trying to test the international reaction to its current actions vis-à-vis Georgia and the Georgian government should double its efforts to alert the world community about the latest incidents.

Without the decisive intervention of the United States and other major actors, it is hardly imaginable that Russia would observe its commitments under the 2008 ceasefire agreement and allow the European Union’s Monitoring Mission free and unimpeded access to occupied Georgian territories.

Media reports on November 12-14 that Georgia will host ambassadors from all 27 EU member states appear promising. The ambassadors will be met by President Saakashvili and members of his government. The foreign diplomats also plan to visit villages where displaced persons were housed in the aftermath of the Russia invasion.

A very interesting article by Paul Goble which appeared on the website www.windowoneurasia.blogspot.com

Moscow city officials are refusing to renew the leases of two leading Russian human rights activist groups, an action that the groups are appealing but that some observers are explaining as official retribution for the participation of these groups in recent anti-government protests and as a reflection of negative trends in Russian life.

Lyudmila Alekseyeva, the dean of Russian human rights activists and the head of the Moscow Helsinki Group, said that Moscow city officials were refusing to extend the lease the Group has for offices in the Russian capital. Lev Ponomaryev, head of the For Human Rights Movement, said officials had taken the same action against his group.

Both of them have appealed to Vladimir Lukin, the Russian government rights activist, and Aleksandr Muzaykantsky, Lukin’s Moscow city counterpart, as well as to Ella Pamfilova, the head of President Dmitry Medvedev’s Council for the Support of the Development of the Institutions of Civil Society and Human Rights (lenta.ru/news/2009/11/06/oust/).

Alekseyeva told the Russian media that all three of these individuals had promised to help the two groups reverse these decisions. But Ponomaryev said that the fact that officials had taken nearly simultaneous actions against the two groups suggests that broader Russian government policies were behind the move.

In a comment posted on the Grani.ru portal, the For Human Rights Movement leader suggested that Moscow officials appear to have “listened to Medvedev’s ‘Russia, Forward!’ appeal and decided that the time had come to push the human rights activists into the street” (grani.ru/Politics/Russia/activism/m.161740.html).

Eduard Limonov, the leader of the National Bolsheviks, expressed the view on his blog that the Moscow city authorities had acted either at the behest of or with the implicit approval of the federal government, many of whose members are angry at Alekseyeva and Ponomaryev for taking part in the October 31 protests (limonov-eduard.livejournal.com/27382.html).

And the radical leader called on his followers to be ready to come to the defense of the two groups in a non-violent way if and when officials from the government of the Russian capital try to expel the Moscow Helsinki Group and the For Human Rights Movement from their offices.

In many ways, one might think that the timing of this action could not be worse: This week marks the 20th anniversary of the fall of the Berlin Wall and the dawning of what many hoped would be a new era of freedom; and last week, the German government decorated Alekseyeva for her “many years of struggle for democratic values and human rights.”

But unfortunately, it is just possible that the Russian powers that be which have been taking ever more steps against the rights groups like these seek to defend may have correctly calculated that they will escape criticism from many in the West who continue to hope that under Dmitry Medvedev, Moscow is moving in a more positive direction.

Sunday, November 8, 2009

by Daniel McGroartyInvestor's Business Daily ran a wonderful article by former White House speechwriter Dan McGroarty about the fall of the Berlin Wall. The full text can be read on Investors.com.

Twenty years ago, late on a Thursday evening in Berlin, the cement and concertina-wire symbol of the Cold War was breached, inadvertently opened by a botched answer of a flustered East German Communist Party apparatchik.Announcing a loosening in border-crossing policy, he was peppered with questions on when the change would take effect.

Reporters rush to file; word is broadcast over Western media stations on the channels no East German is allowed to watch, but everyone does. The streets fill as people head for the Wall.

The rest, as they say, is history: Bewildered East Germans step past the feared Grenztruppen border guards, their rifles shouldered and dogs at bay, across the death strips and into West Berlin.

Growing more confident, some straddle the Wall, improvising implements to chip away chunks of cement, while still others wander deeper into the Western zone, looking for vegetable vendors where bananas might be bought — every day, and not just on Christmas. If all proved a dream, let some at least bring back from their walk in the West a piece of forbidden fruit.

The fact of the Wall's fall is captured in the news clips rebroadcast today. Its cause and consequences took much longer to unpack — in some ways, we are doing so still.

Witness the small library of new books that marks today's commemoration, 20 years after. Some subscribe to the "great man" theory of history (apologies to Iron Lady Margaret Thatcher), others to what we can call the "chaos theory," capturing the mosaic of micro-actions that brought the Wall down.

On the one end stands Ronald Reagan's Jericho riff at the Brandenburg Gate; at the other, the squabble to claim credit as the unidentified reporter whose shouted question — "also in Berlin?" — toppled the Wall.

Somewhere in the middle — closer to the center of events, and perhaps closer also to the truth — stand Mikhail Gorbachev, Helmut Kohl and George H.W. Bush. Each of them would abjure the megaphone in favor of constant confidential communications to manage the Cold War's last crisis to its peaceful conclusion.

No one in those first moments knew whether the East German government and its Soviet overlords would meet the Berlin breach with an iron fist or velvet glove. The events of Nov. 9, 1989 were fraught with contingency. The events we now wrap in a celebratory glow evoked the ghosts of 1956 and 1968 — or even nearer in time, Tiananmen Square just five months earlier.

Friday, November 6, 2009

A Tragic Anniversary in Georgia

by Paul Goble

Vienna, November 6 – Tomorrow, in various ways and with various feelings in their hearts, many people across the former Soviet space will commemorate the 72nd anniversary of the Bolshevik coup d’état. But in Georgia, many will mark the 2nd anniversary of what they see as the dashing of the hopes of the Rose Revolution by Georgian President Mikheil Saakashvili.The full text of Paul Gobles article can be read on.

On that date, two years ago, Saakashvili first ordered his security services to use tear gas, water cannon and rubber bullets to disperse protesters who were demanding his resignation and then closed down two of the independent television networks in order to prevent the opposition from communicating with the rest of the country,

In the wake of those actions, the Georgian president called a snap election, the result of which he invoked as justification for his course of action, a course that not only has alienated many of those who first supported him in the 2002 rising which overthrew Eduard Shevardnadze but set the stage for the conflict with Moscow that led to the Russian invasion in August 2008.

Sergey Markedonov, one of Moscow’s most thoughtful commentators on the Caucasus, says that it is unlikely that the opposition will be able to mount as large a protest on this date as it has in the past, but he insists those events are nonetheless going to echo in Georgia and across the former Soviet space for a long time to come (www.politcom.ru/9069.html).

The Moscow analyst gives three reasons for thinking that the opposition is unlikely to be able to organize a serious protest on this anniversary. First, he points out, Saakashvili’s opponents remain divided, even as one or another of their leaders continues to come up with projects for new political parties and movements.(The most recent of these – the creation of a Social Democratic Movement for the Development of Georgia – was announced only three days ago. As Markedonov notes, “from a purely theoretical point of view,” such a movement is “interesting” because it was the Social Democrats (Mensheviks) who led Georgia during the years of the Russian Civil War.)

Second, Markedonov points out, Western governments have grown tired of “illegitimate changes of power in a country pretending to the title of the ‘advance post of democracy in the Caucasus” and very much want that “the departure of the third president of Georgia be according to the constitution” rather than as a result of street protests.

And third – and this is no small thing, Markedonov suggests – the Saakashvili regime “however much people in the Kremlin talk about its unpopularity and loss of trust among the population as before retains definite resources of influence in society,” both through its control of the media and through its control of the force structures.

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